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| Norfolk Southern Corporation | Volume 4, Issue 11, November 2004 |
For the third-quarter of 2004, Norfolk Southern Corporation reported record revenues of $1.9 billion, up 16 percent compared with the same period last year, and record third-quarter income from railway operations of $469 million, up 51 percent compared with the third quarter of 2003.
Third-quarter reported net income was $288 million, or $0.72 per diluted share, which included a noncash gain of $53 million, or $0.13 per diluted share, from the Conrail corporate reorganization. Excluding the gain, net income was $235 million, or $0.59 per diluted share, an increase of 72 percent, compared with $137 million, or $0.35 per diluted share, in the same period last year.
The railway operating ratio for the third quarter improved 5.8 percentage points to 74.7 percent compared with 80.5 percent in the same period of 2003.
“By any measure, this was an extremely strong quarter for our company,” said David R. Goode, chairman and chief executive officer. “We demonstrated uniform strength in the face of a robust peak traffic season, and our people and network performed well.”
For the first nine months, reported net income was $659 million, or $1.66 per diluted share, which included the $53 million, or $0.13 per diluted share, gain on the Conrail reorganization. Excluding the gain, net income was $606 million, or $1.53 per diluted share, an increase of 25 percent, compared with $483 million, or $1.24 per diluted share, for the same period of last year. Net income for the first nine months of 2003 included a $114 million, or $0.29 per diluted share, gain due to a required industrywide accounting change to account for the cost of removing railroad crossties, and a gain of $10 million, or $0.03 per diluted share, from discontinued motor carrier operations.
Railway operating revenues for the first nine months of 2004 increased 12 percent to a record $5.4 billion compared with $4.8 billion for the same period a year earlier.
The railway operating ratio for the first nine months improved 5.6 percentage points to 76.9 percent compared with 82.5 percent in the same period of 2003.
Third-quarter general merchandise revenues reached $1.0 billion, an increase of 10 percent over the same quarter last year. For the first nine months, general merchandise revenues improved 8 percent to a record $3.0 billion compared with the year-earlier period. All merchandise markets reported revenue gains compared with the same periods a year earlier.
Coal revenues increased 20 percent to $447 million in the third quarter and improved 14 percent to $1.3 billion for the first nine months of 2004 compared with the same periods last year. This growth principally was driven by increases in export and utility coal revenues.
Intermodal revenues grew 28 percent to a record $404 million in the third quarter and improved 21 percent to a record $1.1 billion for the first nine months compared with the same periods of 2003. Significantly increased traffic volumes and higher average revenues helped drive the growth.
Third-quarter railway operating expenses were up $101 million, or 8 percent, compared with third quarter last year. For the first nine months, railway operating expenses rose $171 million, or 4 percent, over the same period in 2003. Both increases were primarily related to the higher business volumes.
Norfolk Southern announced changes to its senior management team, including the election of a new president and the promotion of six senior executives. The changes were effective Oct. 1.
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| Charles W. Moorman |
David R. Goode , chairman and chief executive officer, said that Charles W. Moorman, formerly senior vice president corporate planning and services, was elected president.
L.I. Prillaman , vice chairman and chief marketing officer; Stephen C. Tobias, vice chairman and chief operating officer; and Henry C. Wolf, vice chairman and chief financial officer, report to Moorman.
Moorman, a native of Hattiesburg , Miss. , and a graduate of Georgia Tech and Harvard Business School , joined NS in 1970. He has served in senior positions in the corporation’s transportation, personnel, labor relations, information technology and strategic planning areas. He was named president of NS’ Thoroughbred Technology and Telecommunications subsidiary in 1999 and to his current position in 2003.
Goode announced the following executive changes:
James A. Hixon , formerly senior vice president legal and government affairs, was named executive vice president finance and public affairs, reporting to Wolf. Reporting to Hixon are John F. Corcoran, senior vice president public affairs; Marta R. Stewart, vice president and controller; William A. Galanko, vice president taxation; William J. Romig, vice president and treasurer; and the financial planning group.
Mark D. Manion , formerly senior vice president transportation operations, was named executive vice president operations, reporting to Tobias. Gerhard A. Thelen, vice president mechanical, and the transportation operations group report to Manion.
Kathryn B. McQuade, formerly senior vice president finance, was named executive vice president planning and chief information officer, reporting to Moorman. Reporting to McQuade are the strategic planning group; Cindy C. Earhart, vice president information technology; H. Craig Lewis, vice president corporate affairs; NS’ East Carolina Business Unit; and the T-Cubed subsidiary.
John P. Rathbone, formerly senior vice president administration, was named executive vice president administration, reporting to Moorman. Reporting to Rathbone are Robert C. Fort, vice president public relations; Thomas H. Mullenix Jr., vice president human resources; Mark R. MacMahon, vice president labor relations; and the material management and strategic sourcing groups.
Donald W. Seale, formerly senior vice president marketing services, was named executive vice president sales and marketing, reporting to Prillaman. Reporting to Seale are Daniel D. Smith, senior vice president energy and properties; Robert E. Martínez, vice president business development; Michael R. McClellan, vice president intermodal marketing; Robert E. Huffman, vice president intermodal operations; and the corporation’s five merchandise marketing groups.
James A. Squires, formerly vice president law, was named senior vice president law, reporting to Wolf.
In announcing the changes, Goode said, “ Norfolk Southern is extremely fortunate to have such a talented executive team, and Wick Moorman is a seasoned, dynamic leader. This is the team that will help us take full advantage of the opportunities presented by our expanding markets and efficient transportation network.”
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| James A. Hixon | Mark D. Manion | Kathryn B. McQuade |
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| John P. Rathbone | Donald W. Seale | James A. Squires |
The Federal Railroad Administration has awarded Norfolk Southern a $544,000 grant to study the effec-tiveness of RailView, a technology developed by NS to improve safety. NS is the first to use the technology.
Adam Mastrangelo, electrical engineer, and Greg Lowe, senior innovations engineer, both of the Research & Tests Department, began working with Science Applications International Corporation in 1995 to develop a system to help analyze the root cause of incidents. The result was a system that uses a camera mounted on a locomotive to record activity in front of a moving train. It records train speed and whistle operation.
“These cameras are essential to the safe operation of our trains, employee safety and the safety of our customers’ valuable cargo,” Mastrangelo said. “They provide a visual record of events. The train system also contains data boxes that establish train speed, whether the horn works or was blown, if something is obstructing the path of the locomotive and the cause of an accident. These are essential elements in safety.”
Mastrangelo said the ultimate goal of the system and study is to make highway-rail grade crossings safer. “This will allow us to demonstrate the effectiveness of safety measures already in place, assess behavior and give us the opportunity to make changes where they are needed most,” he said.
By the end of the year, 1,100 locomotives will be equipped with RailView. The company expects to add 500 more in 2005.
Mastrangelo and Lowe received NS’ 2002 Thoroughbred Award for developing RailView.
An unprecedented series of storms barraged the Southeast and Northeast, bringing high winds and heavy rains, causing major disruptions from Florida to New England and testing Norfolk Southern’s ability to keep trains moving safely.
Over a six-week period in August and September, areas of NS territory felt the collective wraths of hurricanes Frances, Ivan and Jeanne, and Tropical Storm Gaston. Because of the company’s contingency plan for severe weather, NS people were ready to withstand the brunt of the storms, minimize damage and maintain safety.
“Locomotives were moved to secure locations on higher ground and ballast trains were positioned in Macon and Atlanta. Four backup generators were in position to move in case of loss of power,” said Dave Talley, Georgia Division superintendent.
“After Hurricane Frances, our C&S Department people restored service to signals and crossing warning devices within 48 hours working in high winds and rains during the night, with trees falling around them. Maintenance-of-way crews removed nearly 800 trees from railroad tracks. Everyone worked to restore service safely with no incidents reported,” Talley said.
“Good storm preparation is the key to the quickest recovery after the storm passes,” said E.J. Hauber, assistant superintendent Alabama Division, as Ivan took aim at the Gulf Coast . “Our plan covers both Mobile and New Orleans . We moved locomotives from Oliver Yard and New Orleans to higher ground, secured loose items and removed crossing gates from crossings.”
Hauber said 2,653 downed trees were removed from the tracks. “Most of these were on the Selma-Mobile line, but other lines also were affected by downed trees. Our maintenance-of-way forces did an excellent job of getting this done quickly and safely.”
In Pennsylvania, Engineering Department employees, signal maintainers and backup generators were in place at strategic locations ahead of the storms. The western part of the state sustained a significant amount of storm damage from floods and wind damage. Flood watches and warnings slowed rail traffic. During Hurricane Ivan, several mudslides and high water conditions affected all traffic operating between Chicago and Philadelphia.
“Our Pittsburgh, Conemaugh, Cleveland, Monongahela, Reading and Lehigh lines all had water over the rail, and in some areas it was in excess of four feet,” said Bob Bartle, assistant general manager Northern Region. “Heavy rainfall washed away much of the ballast along these lines, creating either speed restrictions or further delays in repairs once the water level receded. Severe weather and flooding conditions in Harrisburg , Pa. , brought track and signal damage that affected train operations for more than 24 hours.”
“Even with a devastating hurricane, things ran fairly smoothly because we were prepared,” Bartle said. “Train operations in the Northern region ran better than expected due primarily to good planning by all departments and a strong commitment from our employees to provide the service our customers depend on.”
As if three hurricanes weren’t enough to deal with, August’s Tropical Storm Gaston spared no mercy as it flooded the Richmond, Va., area, causing problems for NS operations there. Severe flooding from the storm closed a rail spur from Burkeville to Richmond , and 12 other lines in the area were closed for a week.
“Never underestimate the power of nature and the effect it can have on a community,” Talley said. “And never underestimate the ability of our employees. They did extraordinary things under the most challenging of conditions.”
Norfolk Southern’s Lawmen played at an Oct. 27 concert to benefit victims of flooding associated with Hurricane Ivan in Franklin , N.C. The area was already waterlogged from Hurricane Frances in mid-September. Flooding and mudslides from Ivan in one area swept away homes, claiming five lives and injuring 15.
“We received a call from Hugh Simpson, a resident of the area, asking if we’d like to be part of a fund-raising event for those who lost so much when the remnants of Hurricane Ivan came through,” said Stan West, manager for the band. “We were happy to be able to bring some help and some smiles to people in Franklin after such a devastating experience.”
West said all money raised was given to CareNet, a nonprofit organization that will distribute the funds.
Earlier in the month, the group played at a fund-raiser for Cystic Fibrosis, sponsored by the Central Fire Department in Elizabeth , Pa. , and helped raise more than $7,000.
“It makes us all feel good to help. I wish we could do more,” West said.
Between sets, band members autographed caps and T-shirts.
Employees at Triple Crown Services Company’s maintenance and repair facility in Fort Wayne , Ind. , have worked three consecutive years — more than 1,100 days — with no lost-time accidents.
The terminal and maintenance facility operates 24 hours a day throughout the year. An average of 10 trains, each averaging 85 trailers, moves through the Fort Wayne terminal every day.
The facility is Triple Crown’s only maintenance shop. Repairs and preventive maintenance are completed on truck trailers sent to the site from terminals across the U.S.
“This is an extraordinary achievement, and there’s no other way to describe it,” said Rick Vanke, terminal manager. “Combine that with the construction we’ve had all summer and the additional trailers moving through here, and it all adds up to quite an accomplishment. I could not be more proud of our team and their dedication to providing top quality equipment and service to our customers.”
Triple Crown Services is a bimodal, truckload transportation company utilizing unique RoadRailer ® trailers to combine both over-the-road and on-the-rail transportation.
Triple Crown Services Company, a subsidiary of Norfolk Southern Corporation, provides transportation services in the United States and parts of Canada .
Norfolk Southern says “thank you for your service to our nation” as it salutes its veterans past and present and their families in November. The company’s Diversity Council is sponsoring the celebration.
“Veterans come from all walks of life, and we want to highlight the contribution our veterans make to our company’s diversity,” said J.C. Holland, locomotive engineer and Diversity Council member.
The company’s Web site, www.nscorp.com, has a section devoted to the celebration. Information about community activities across the system, a weekly quiz, military facts of the day and personal recollections of NS employees who are veterans or have veteran family members are on the site. Information will be updated throughout the month. Links to other information about the U.S. Armed Forces also are on the page. A special poster was designed and distributed to all NS facilities.
“Traditionally, we honor American veterans on Nov. 11 — Veterans Day — but we believe that every day is a good day to honor the contributions of our veterans,” said Ed Trinkle, general superintendent terminal operations and Diversity Council member. “We also want to recognize the important support of family members to our veterans.”
In addition to Brown and Trinkle, Veterans Month team members include: Peggy Scholzen, labor relations officer; Pam Blakeney, assistant manager process improvement, centralized yard operations; Mary Deangelis, clerk, mechanical; Curtis McElroy, locomotive engineer; Ron Spradlin, senior claim agent; Clarence Walton, lead clerk accounting; Linda Duncan, manager diversity; David Cobbs Jr., assistant vice president diversity and EEO; Allison Enedy, manager online communications, public relations; Frank Wright, design manager, public relations; and Andrea Just, manager corporate communications, public relations.
In 1921, an unknown American World War I soldier was buried at Arlington National Cemetery . A few years earlier, similar ceremonies took place in England and France . These memorial gestures all took place on Nov. 11, giving universal recognition to the end of World War I combat at 11 a.m. Nov. 11, 1918. The date became known as Armistice Day.
Armistice Day officially received recognition in the United States in 1926 by congressional resolution. It became a national holiday 12 years later. A few years after the holiday was proclaimed, war broke out in Europe . World War II saw 16.5 million Americans participate, with more than 407,000 dying in service.
To pay tribute to those who had served in WWII, Armistice Day became Veterans Day. It was intended to honor those who had served the U.S. in all wars. In 1954, President Eisenhower officially proclaimed Nov. 11 Veterans Day.
Look no further than the Norfolk Southern Company Store. Accessed through the company’s Web site, the store offers a variety of items from clothing to golf gear to travel gear. Check it out at www.nscorp.com.
Also available are NS 2005 calendars for $10.95 (including tax, postage and handling). Use a credit card by calling toll-free 1-800-264-4394 between 8:30 a.m. and 5 p.m. EST, or by sending a check or money order for $10.95 to:
Norfolk Southern Calendar
c/o Nyberg, Fletcher and White
2915 Whittington Ave.
Baltimore , Md. 21230